Investment Summary. We are initiating coverage of HGEN shares with an OW rating
and 12-month PT of $25. We arrive at our PT by using a DCF analysis. HGEN's lead
product candidate, lenzilumab, is a mAb designed to neutralize GM-CSF. We expect
upwards earnings revisions from the successful commercialization of three indications
for lenzilumab to drive HGEN shares higher. These include the use of lenzilumab: 1)
As a therapy for hospitalized patients with COVID-19 pneumonia, and Phase 3 data are
expected in 4Q20; 2) As a sequenced therapy ahead of CAR-T administration, Phase 1b
ZUMA-19 results are expected 1Q21; and 3) As an early treatment/prophylaxis for SRaGvHD, HGEN will complete planning for a registration study in the UK 4Q20 and begin
enrollment in 1H21.
¦ Expecting positive Phase 3 data for COVID-19 opportunity. Lenzilumab could be the
first antibody approved for cytokine storm associated with COVD-19, and HGEN could
make up to $1B in sales in 2021, if the drug is given EUA. We are expecting HGEN
to report positive, Phase 3 data 4Q20. This is supported by the published data from
the Mayo Clinic. The Mayo data was from a 39-patient case-controlled study. Twelve
patients were treated with lenzilumab and were compared to 27 similar patients
on SoC. The data showed that: 1) The time to clinical improvement was shorter
for lenzilumab: 5 days vs. 11 and 2) Ventilator-free survival was much better for
lenzilumab vs. SoC. HGEN is also participating in the NIH-sponsored ACTIV-5/Big Effect
Trial. These data will likely read out in 1H21. Importantly, lenzilumab is a 1-day course
of therapy that compares favorably to Remdesivir, which runs ~5 days. Finally, a paper
published on 10/14 (link here) adds more weight to GM-CSF as a target for COVID-19.
See our COVID-19 mAb tracker here for more details on the competitive landscape.
¦ Lenzilumab could change treatment paradigm & expand market for CAR-T. There is
evidence linking early elevation of GM-CSF to serious and potentially life-threatening
side effects in CAR-T therapy (neurotoxicity and CRS). Pre-clinical lenzilumab data
have supported its potential to prevent CRS and significantly reduce neurotoxicity,
and have shown an increase in CAR-T cell expansion when lenzilumab is administered
prophylactically in combination with CAR-T. This could expand the use of CAR-Ts
and the market opportunity for lenzilumab. There are currently no FDA-approved
therapies for the prevention of the serious side-effects associated with CAR-T. Positive
data could support putting all/most CAR-T patients on sequenced therapy with
lenzilumab. HGEN is collaborating with Kite/GILD (OW, covered by A. Young) on the
ZUMA-19 study. HGEN's goal is to complete the Phase 1b part this year and move
into the Phase 2 study next year. HGEN is also looking to study sequencing lenzilumab
ahead of other CAR-T therapies.
¦ Lenzilumab could change treatment paradigm for SR-aGvHD. Recent studies have
found GM-CSF to be an important pathogenic cytokine in aGvHD. Donor T cells that
secrete GM-CSF promote GvHD by recruiting donor dendritic cells, which amplifies the
activation of alloreactive T cells and increases the severity of GvHD. Therefore, GMCSF neutralization has the potential to prevent or treat GvHD in patients undergoing
allogeneic HSCT. HGEN has been approached by a group called the Impact Partnership,
which is a partnership of 23 transplant centers in the UK that treat the majority of
UK patients and also run clinical trials as part of the network. ~50% of all patients
with aGvHD will be intermediate/high risk of SR-aGvHD and would be eligible for
lenzilumab based on the IMPACT protocol. If successful in early treatment of SRaGvHD, HGEN would look to position lenzilumab as prophylaxis of aGvHD with further
clinical development.
